Income Tax Act 2007

Part 2 U.K. Basic provisions

Chapter 1 U.K. Charges to income tax

3 Overview of charges to income tax U.K.

(1) Income tax is charged under—

(a) Part 2 of ITEPA 2003 (employment income),

(b) Part 9 of ITEPA 2003 (pension income),

(c) Part 10 of ITEPA 2003 (social security income),

(d) Part 2 of ITTOIA 2005 (trading income),

(e) Part 3 of ITTOIA 2005 (property income),

(f) Part 4 of ITTOIA 2005 (savings and investment income), and

(g) Part 5 of ITTOIA 2005 (miscellaneous income).

(2) Income tax is also charged under other provisions, including—

(a) Chapter 5 of Part 4 of FA 2004 (registered pension schemes: tax charges),

(b) section 7 of F(No.2)A 2005 (social security pension lump sums),

(c) Part 10 of this Act (special rules about charitable trusts etc),

(d) Chapter 2 of Part 12 of this Act (accrued income profits), F1 ...

(e) Part 13 of this Act (tax avoidance)[F2 , and

(f) Chapter 3A of Part 14 of this Act (banks etc in compulsory liquidation).]

Textual Amendments

F1 Word in s. 3(2) repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 70(a), Sch. 10 Pt. 12 (with Sch. 9 paras. 1-9, 22)

F2 S. 3(2)(f) And word inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 70(b) (with Sch. 9 paras. 1-9, 22)

4 Income tax an annual tax U.K.

(1) Income tax is charged for a year only if an Act so provides.

(2) A year for which income tax is charged is called a “tax year”.

(3) A tax year begins on 6 April and ends on the following 5 April.

(4) “The tax year 2007-08” means the tax year beginning on 6 April 2007 (and any corresponding expression in which two years are similarly mentioned is to be read in the same way).

(5) Every assessment to income tax must be made for a tax year.

(6) Subsection (5) is subject to Chapter 15 of Part 15 (by virtue of which an assessment may relate to a return period).

[F3 5 Income tax and companies U.K.

Section 3 of CTA 2009 disapplies the provisions of the Income Tax Acts relating to the charge to income tax in relation to income of a company (not accruing to it in a fiduciary or representative capacity) if—

(a) the company is UK resident, or

(b) the company is non-UK resident and the income is within its chargeable profits as defined by section 19 of that Act (profits attributable to its permanent establishment in the United Kingdom).]

Textual Amendments

F3 S. 5 substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 700 (with Sch. 2 Pts. 1, 2)

Chapter 2 U.K. Rates at which income tax is charged

The rates U.K.

6 F4 The ... basic rate[F5 , higher rate and additional rate] U.K.

(1) The main rates at which income tax is charged are—

F6 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the basic rate, F7 ...

(c) the higher rate[F8 , and

(d) the additional rate.]

(2) The F9 ... basic rate[F10 , higher rate and additional rate] for a tax year are the rates determined as such by Parliament for the tax year.

F11 (2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11 (2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11 (2C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) For other rates at which income tax is charged see—

[F12 (za) section 6A (Scottish basic, higher and additional rates),]

[F13 (a) section 7 (starting rate for savings),]

(b) section 8 (dividend ordinary rate[F14 , dividend upper rate and dividend additional rate]), and

(c) section 9 (trust rate and dividend trust rate).

Textual Amendments

F4 Words in s. 6 heading omitted (21.7.2008 with effect in accordance with s. 5(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 5(5)

F5 Words in s. 6 heading substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 2(3)

F6 S. 6(1)(a) omitted (21.7.2008 with effect in accordance with s. 5(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 5(2)

F7 Word in s. 6(1)(b) omitted (with effect in accordance with s. 6(6) of the amending Act) by virtue of Finance Act 2009 (c. 10), s. 6(2)

F8 S. 6(1)(d) and preceding word inserted (with effect in accordance with s. 6(6) of the amending Act) by Finance Act 2009 (c. 10), s. 6(2)

F9 Words in s. 6(2) omitted (21.7.2008 with effect in accordance with s. 5(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 5(3)

F10 Words in s. 6(2) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 2(2)

F11 S. 6(2A)-(2C) omitted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 38 para. 2(a)

F12 S. 6(3)(za) inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 2(b)

F13 S. 6(3)(a) substituted (21.7.2008 with effect in accordance with s. 5(6) of the amending Act) by Finance Act 2008 (c. 9), s. 5(4)

F14 Words in s. 6(3)(b) substituted (with effect in accordance with s. 6(6) of the amending Act) by Finance Act 2009 (c. 10), s. 6(3)

[F15 6A The Scottish basic, higher and additional rates U.K.

(1) The Scottish basic rate, the Scottish higher rate and the Scottish additional rate for a tax year are calculated as follows.

• Step 1 Take the basic rate, higher rate or additional rate.

• Step 2 Deduct 10 percentage points.

• Step 3 Add the Scottish rate (if any) set by the Scottish Parliament for that year.

(2) For provision about the setting of the Scottish rate, see Chapter 2 of Part 4A of the Scotland Act 1998.]

Textual Amendments

F15 S. 6A inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 3

[F16 7 The starting rate for savings U.K.

The starting rate for savings is [F17 0%].]

Textual Amendments

F16 S. 7 substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 2

F17 Word in s. 7 substituted (with effect in accordance with s. 3(5) of the amending Act) by Finance Act 2014 (c. 26), s. 3(1)

8 The dividend ordinary rate[F18 , dividend upper rate and dividend additional rate] U.K.

(1) The dividend ordinary rate is 10%.

(2) The dividend upper rate is 32.5%.

[F19 (3) The dividend additional rate is [F20 37.5%].]

Textual Amendments

F18 Words in s. 8 heading substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 3(3)

F19 S. 8(3) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 3(2)

F20 Figure in s. 8(3) substituted (17.7.2012) (with effect in accordance with s. 1(6) of the amending Act) by Finance Act 2012 (c. 14), s. 1(3)(a)

9 The trust rate and dividend trust rate U.K.

(1) The trust rate is [F21 45%].

(2) The dividend trust rate is [F22 37.5%].

Textual Amendments

F21 Words in s. 9(1) substituted (17.7.2012) (with effect in accordance with s. 1(6) of the amending Act) by Finance Act 2012 (c. 14), s. 1(3)(b)

F22 Words in s. 9(2) substituted (17.7.2012) (with effect in accordance with s. 1(6) of the amending Act) by Finance Act 2012 (c. 14), s. 1(3)(c)

Income charged at particular rates U.K.

10 F23 Income charged at the ... basic[F24 , higher and additional] rates: individuals U.K.

F25 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F26 (2) Income tax on an individual's income up to the basic rate limit is charged at the basic rate (except to the extent that, in accordance with section 12, it is charged at the starting rate for savings).]

(3) Income tax is charged at the higher rate on an individual's income above the basic rate limit [F27 and up to the higher rate limit.]

[F28 (3A) Income tax is charged at the additional rate on an individual's income above the higher rate limit.]

F29 (3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F29 (3C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) This section is subject to—

• F30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• [F31 section 11A (income charged at the Scottish basic, higher and additional rates),]

• section 13 (income charged at the dividend ordinary and dividend upper rates: individuals), and

• any other provisions of the Income Tax Acts which provide for income of an individual to be charged at different rates of income tax in some circumstances.

(5) The basic rate limit is [F32 £31,900] [F33 £32,300] .

[F34 (5A) The higher rate limit is £150,000.]

[F35 (6) The basic rate limit [F36 and higher rate limit are] increased in some circumstances: see—

(a) section 414(2) (gift aid relief), and

(b) section 192(4) of FA 2004 (relief for pension contributions).

(7) See section 21 for indexation of the basic rate limit.]

Textual Amendments

F23 Word in s. 10 heading omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 3(6)

F24 Words in s. 10 heading substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(6)

F25 S. 10(1) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 3(2)

F26 S. 10(2) substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 3(3)

F27 Words in s. 10(3) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(2)

F28 S. 10(3A) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(3)

F29 S. 10(3B)(3C) omitted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 38 para. 4(a)

F30 S. 10(4) entry omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 3(4)

F31 Words in s. 10(4) inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 4(b)

F32 Sum in s. 10(5) substituted (26.3.2015 for the tax year 2016-17) by Finance Act 2015 (c. 11), s. 4(1)(a)

F33 Sum in s. 10(5) substituted (26.3.2015 for the tax year 2017-18) by Finance Act 2015 (c. 11), s. 4(1)(b)

F34 S. 10(5A) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(4)

F35 S. 10(6)(7) inserted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 3(5)

F36 Words in s. 10(6) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(5)

11 Income charged at the basic rate: other persons U.K.

(1) Income tax is charged at the basic rate on the income of persons other than individuals.

(2) This section is subject to—

• F37 ...

• section 14 (income charged at the dividend ordinary rate: other persons),

• Chapters 3 to 6 of Part 9 (which provide for some income of trustees to be charged at the dividend trust rate or at the trust rate), and

• any other provisions of the Income Tax Acts which provide for income of persons other than individuals to be charged at different rates of income tax in some circumstances.

Textual Amendments

F37 Words in s. 11(2) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 4

[F38 11A Income charged at the Scottish basic, higher and additional rates U.K.

(1) Income tax is charged at the Scottish basic rate on the income of a Scottish taxpayer which—

(a) is non-savings income, and

(b) would otherwise be charged at the basic rate.

(2) Income tax is charged at the Scottish higher rate on the income of a Scottish taxpayer which—

(a) is non-savings income, and

(b) would otherwise be charged at the higher rate.

(3) Income tax is charged at the Scottish additional rate on the income of a Scottish taxpayer which—

(a) is non-savings income, and

(b) would otherwise be charged at the additional rate.

(4) For the purposes of this section, “non-savings income” means income which is not savings income.

(5) This section is subject to—

• section 13 (income charged at the dividend ordinary, upper and additional rates: individuals), and

• any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.

(6) Section 16 has effect for determining the extent to which the non-savings income of a Scottish taxpayer would otherwise be charged at the basic, higher or additional rate.]

Textual Amendments

F38 S. 11A inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 5

[F39 12 Income charged at the starting rate for savings U.K.

(1) Income tax is charged at the starting rate for savings (rather than the basic rate) on so much of an individual's income up to the starting rate limit for savings as is savings income.

(2) This is subject to any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.

(3) The starting rate limit for savings is [F40 £5,000].

(4) See section 21 for indexation of the starting rate limit for savings.

(5) Section 16 has effect for determining the extent to which a person's income up to the starting rate limit for savings consists of savings income.]

Textual Amendments

F39 S. 12 substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 5

F40 Sum in s. 12(3) substituted (temp.) (17.7.2014) by Finance Act 2014 (c. 26), s. 3(2)

13 Income charged at the dividend ordinary[F41 , dividend upper and dividend additional] rates: individuals U.K.

(1) Income tax is charged at the dividend ordinary rate on an individual's income which—

(a) is dividend income,

(b) would otherwise be charged at the F42 ... basic rate, [F43 or the Scottish basic rate,] and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(2) Income tax is charged at the dividend upper rate on an individual's income which—

(a) is dividend income, F44 ...

(b) would otherwise be charged at the higher rate, [F45 or the Scottish higher rate,] [F46 and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.]

[F47 (2A) Income tax is charged at the dividend additional rate on an individual's income which—

(a) is dividend income,

(b) would otherwise be charged at the additional rate, [F48 or the Scottish additional rate,] and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.]

(3) Subsections (1) [F49 to (2A)] are subject to any provisions of the Income Tax Acts (apart from section 10 [F50 or 11A]) which provide for income to be charged at different rates of income tax in some circumstances.

(4) Section 16 has effect for determining the extent to which an individual's dividend income would otherwise be charged at the F51 ... basic [F52 , higher or additional] rate [F53 or the Scottish basic, higher or additional rate].

Textual Amendments

F41 Words in s. 13 heading substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 5(5)

F42 Words in s. 13(1)(b) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 6(a)

F43 Words in s. 13(1)(b) inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 6(a)

F44 Word in s. 13(2)(a) omitted (21.7.2008 with effect in accordance with s. 68(2) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 68(1)(a)

F45 Words in s. 13(2)(b) inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 6(b)

F46 S. 13(2)(c) and word inserted (21.7.2008 with effect in accordance with s. 68(2) of the amending Act) by Finance Act 2008 (c. 9), s. 68(1)(b)

F47 S. 13(2A) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 5(2)

F48 Words in s. 13(2A)(b) inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 6(c)

F49 Words in s. 13(3) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 5(3)

F50 Words in s. 13(3) inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 6(d)

F51 Word in s. 13(4) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 6(b)

F52 Words in s. 13(4) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 5(4)

F53 Words in s. 13(4) inserted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 6(e)

14 Income charged at the dividend ordinary rate: other persons U.K.

(1) Income tax is charged at the dividend ordinary rate on the income of persons other than individuals which—

(a) is dividend income,

(b) would otherwise be charged at the basic rate, and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(2) This is subject to—

• Chapters 3 to 6 of Part 9 (which provide for some income of trustees to be charged at the dividend trust rate or at the trust rate),

• F54 ... and

• any other provisions of the Income Tax Acts (apart from section 11) which provide for income of persons other than individuals to be charged at different rates of income tax in some circumstances.

Textual Amendments

F54 Words in s. 14(2) omitted (6.4.2014) by virtue of The Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819), regs. 1(3), 37(3) (with reg. 32)

15 Income charged at the trust rate and the dividend trust rate U.K.

For the circumstances in which income tax is charged at the trust rate and the dividend trust rate, see Chapters 3 to 6 of Part 9.

16 Savings and dividend income to be treated as highest part of total income U.K.

(1) This section has effect for determining[F55 —

[F56 (za) the rate at which income tax would be charged on the non-savings income of a Scottish taxpayer apart from section 11A,]

(a) the extent to which a person's income up to the starting rate limit for savings consists of savings income, and

(b) the rate at which income tax would be charged on a person's dividend income apart from section 13.]

(2) It also has effect for all other income tax purposes except for the purposes of—

(a) section 491 (special rates not to apply to first slice of trustees' trust rate income), and

(b) sections 535 to 537 of ITTOIA 2005 (gains from contracts for life insurance etc: top slicing relief).

(3) If a person has savings income but no dividend income, the savings income is treated as the highest part of the person's total income.

(4) If a person has dividend income but no savings income, the dividend income is treated as the highest part of the person's total income.

(5) If a person has both savings income and dividend income—

(a) the savings income and dividend income are together treated as the highest part of the person's total income, and

(b) the dividend income is treated as the higher part of that part of the person's total income.

(6) See section 1012 for the relationship between—

(a) the rules in this section, and

(b) other rules requiring particular income to be treated as the highest part of a person's total income.

(7) References in this section to dividend income do not include dividend income which is relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

Textual Amendments

F55 Words in s. 16(1) substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 7

F56 S. 16(1)(za) substituted (with effect in accordance with Sch. 38 para. 12 of the amending Act) by Finance Act 2014 (c. 26), Sch. 38 para. 7

17 Repayment: tax paid at basic rate instead of [F57 starting rate for savings] U.K.

(1) This section applies if income tax at the basic rate has been paid on income on which income tax is chargeable at the [F58 starting rate for savings] .

(2) If a claim is made, any necessary repayment of tax must be made.

Textual Amendments

F57 Words in s. 17 heading substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 8(3)

F58 Words in s. 17(1) substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 8(2)

18 Meaning of “savings income” U.K.

(1) This section applies for the purposes of the Income Tax Acts.

(2) “Savings income” is income—

(a) which is within subsection (3) or (4), and

(b) which is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(3) Income is within this subsection if it is—

(a) income chargeable under Chapter 2 of Part 4 of ITTOIA 2005 (interest),

(b) income chargeable under Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity payments), other than income from annuities specified in section 718(2) of that Act (annuities purchased from certain life assurance premium payments or under wills etc),

(c) income chargeable under Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities), or

(d) income chargeable under Chapter 2 of Part 12 of this Act (accrued income profits).

(4) Income is within this subsection if—

(a) it is chargeable under Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc), and

(b) an individual is, or personal representatives are, liable for income tax on it (under section 465 or 466 of that Act).

Modifications etc. (not altering text)

C1 S. 18 excluded by Taxes Management Act 1970 (c. 9), s. 18E(2)(b) (as inserted (with effect in accordance with s. 381(1)) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 103 (with Sch. 9 paras. 1-9, 22))

19 Meaning of “dividend income” U.K.

(1) This section applies for the purposes of the Income Tax Acts.

(2) “Dividend income” is income which is—

(a) chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies),

(b) chargeable under Chapter 4 of that Part (dividends from non-UK resident companies),

(c) chargeable under Chapter 5 of that Part (stock dividends from UK resident companies),

(d) chargeable under Chapter 6 of that Part (release of loan to participator in close company), or

(e) a relevant foreign distribution chargeable under Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged).

(3) In subsection (2) “relevant foreign distribution” means a distribution of a non-UK resident company which—

(a) is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b) would be chargeable under Chapter 3 of that Part if the company were UK resident.

Starting rate limit and basic rate limit U.K.

F59 20 The starting rate limit and the basic rate limit U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F59 S. 20 omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 10

21 Indexation of the [F60 basic rate limit and starting rate limit for savings] U.K.

(1) This section applies if the [F61 consumer prices index] for the September before the start of a tax year is higher than it was for the previous September.

F62 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The basic rate limit for the tax year is the amount found as follows.

Step 1

Increase the basic rate limit for the previous tax year by the same percentage as the percentage increase in the [F63 consumer prices index].

Step 2

If the result of Step 1 is a multiple of £100, it is the basic rate limit for the tax year.

If the result of Step 1 is not a multiple of £100, round it up to the nearest amount which is a multiple of £100.

That amount is the basic rate limit for the tax year.

[F64 (3A) The starting rate limit for savings for the tax year is the amount found as follows.

Step 1

Increase the starting rate limit for savings for the previous tax year by the same percentage as the percentage increase in the [F65 consumer prices index].

Step 2

If the result of Step 1 is a multiple of £10, it is the starting rate limit for savings for the tax year.

If the result of Step 1 is not a multiple of £10, round it up to the nearest amount which is a multiple of £10.

That amount is the starting rate limit for savings for the tax year.]

(4) Subsections [F66 (3) and (3A)] do not require a change to be made in the amounts deductible or repayable under PAYE regulations during the period beginning on 6 April and ending on 17 May in the tax year.

(5) Before the start of the tax year the Treasury must make an order replacing the amounts specified in [F67 sections 10 and 12] with the amounts which, as a result of subsections [F68 (3) and (3A)], are the [F69 basic rate limit and starting rate limit for savings] for the tax year.

[F70 (6) In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.]

Textual Amendments

F60 Words in s. 21 heading substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(6)

F61 Words in s. 21(1) substituted (with effect in accordance with s. 4(4) of the amending Act) by Finance Act 2014 (c. 26), s. 4(2)(a)

F62 S. 21(2) omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 11(2)

F63 Words in s. 21(3) substituted (with effect in accordance with s. 4(4) of the amending Act) by Finance Act 2014 (c. 26), s. 4(2)(a)

F64 S. 21(3A) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(3)

F65 Words in s. 21(3A) substituted (with effect in accordance with s. 4(4) of the amending Act) by Finance Act 2014 (c. 26), s. 4(2)(a)

F66 Words in s. 21(4) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(4)

F67 Words in s. 21(5) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(5)(a)

F68 Words in s. 21(5) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(5)(b)

F69 Words in s. 21(5) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(5)(c)

F70 S. 21(6) inserted (with effect in accordance with s. 4(4) of the amending Act) by Finance Act 2014 (c. 26), s. 4(2)(b)

Modifications etc. (not altering text)

C2 S. 21 excluded (21.7.2009) by Finance Act 2009 (c. 10), s. 2(2)

C3 S. 21 excluded (19.7.2011) by Finance Act 2011 (c. 11), s. 2(2)

C4 S. 21 excluded (17.7.2012) by Finance Act 2012 (c. 14), s. 2(2)

C5 S. 21 excluded (17.7.2013) by Finance Act 2013 (c. 29), s. 3(2)

C6 S. 21 excluded (17.7.2014) by Finance Act 2014 (c. 26), ss. 1(4)(a), 2(2)(a)

C7 S. 21 excluded (temp.) (17.7.2014) by Finance Act 2014 (c. 26), s. 3(3)

C8 S. 21 excluded (26.3.2015) by Finance Act 2015 (c. 11), s. 4(2)

Chapter 3 U.K. Calculation of income tax liability

22 Overview of Chapter U.K.

(1) This Chapter deals with the calculation of a person's income tax liability for a tax year.

(2) But it does not deal with any income tax liability mentioned in section 32.

(3) This Chapter needs to be read with Chapter 1 of Part 14 (limits on liability to income tax of non-UK residents).

23 The calculation of income tax liability U.K.

To find the liability of a person (“the taxpayer”) to income tax for a tax year, take the following steps. Step 1

Identify the amounts of income on which the taxpayer is charged to income tax for the tax year.

The sum of those amounts is “total income”.

Each of those amounts is a “component” of total income.

Step 2

Deduct from the components the amount of any relief under a provision listed in relation to the taxpayer in section 24 to which the taxpayer is entitled for the tax year.

See [F71 sections 24A and 25] for further provision about the deduction of those reliefs.

The sum of the amounts of the components left after this step is “net income”.

Step 3

Deduct from the amounts of the components left after Step 2 any allowances to which the taxpayer is entitled for the tax year under Chapter 2 of Part 3 of this Act or F72 ... (individuals: personal allowance and blind person's allowance).

See section 25 for further provision about the deduction of those allowances.

Step 4

Calculate tax at each applicable rate on the amounts of the components left after Step 3.

See Chapter 2 of this Part for the rates at which income tax is charged and the income charged at particular rates.

If the taxpayer is a trustee, see also Chapters 3 to 6 and 10 of Part 9 (special rules about settlements and trustees) for further provision about the income charged at particular rates.

[F73 See also section 863I of ITTOIA 2005 which provides for certain partnership profits to be charged at the additional rate.]

Step 5

Add together the amounts of tax calculated at Step 4.

Step 6

Deduct from the amount of tax calculated at Step 5 any tax reductions to which the taxpayer is entitled for the tax year under a provision listed in relation to the taxpayer in section 26.

See sections 27 to 29 for further provision about the deduction of those tax reductions.

Step 7

Add to the amount of tax left after Step 6 any amounts of tax for which the taxpayer is liable for the tax year under any provision listed in relation to the taxpayer in section 30.

The result is the taxpayer's liability to income tax for the tax year.

Textual Amendments

F71 Words in s. 23 substituted (with effect in accordance with Sch. 3 para. 3 of the amending Act) by Finance Act 2013 (c. 29), Sch. 3 para. 2(2)

F72 Words in s. 23 omitted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 1 para. 6(o)(i)

F73 Words in s. 23 inserted (with effect in accordance with Sch. 17 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 17 para. 19

Modifications etc. (not altering text)

C9 S. 23 applied (N.I.) (6.4.2009) by The Education (Student Loans) (Repayment) Regulations (Northern Ireland) 2009 (S.R. 2009/128), regs. 1(1), 24(3)

C10 S. 23 modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 6 para. 1(5)

C11 S. 23 applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 1(10)

24 Reliefs deductible at Step 2 U.K.

(1) If the taxpayer is an individual, the provisions referred to at Step 2 of the calculation in section 23 are—

(a) the following—

• section 72 (early trade losses relief),

• Chapter 6 of Part 4 (share loss relief),

• Chapter 3 of Part 8 (gifts of shares, securities and real property to charities etc),

• sections 457 and 458 of this Act or section 266(7) of ICTA (payments to trade unions or police organisations),

• section 193(4) of FA 2004 (pension schemes: relief under net pay arrangement: excess relief), and

• section 194(1) of FA 2004 (pension schemes: relief on making of claim), and

(b) the following—

• section 64 (trade loss relief against general income),

• section 83 (carry-forward trade loss relief),

• section 89 (terminal trade loss relief),

• section 96 (post-cessation trade relief),

• section 118 (carry-forward property loss relief),

• section 120 (property loss relief against general income),

• section 125 (post-cessation property relief),

• section 128 (employment loss relief against general income),

• section 152 (loss relief against miscellaneous income),

• Chapter 1 of Part 8 (interest payments),

• Chapter 4 of Part 8 (annual payments F74 ...),

• section 574 (manufactured dividends on UK shares: payments by non-companies),

• section 579 (manufactured interest on UK securities: payments not otherwise deductible),

• Part 2 of CAA 2001 (plant and machinery allowances), in a case where the allowance is to be given effect under section 258 of that Act (special leasing of plant and machinery),

• F75 ...

• Part 8 of CAA 2001 (patent allowances), in a case where the allowance is to be given effect under section 479 of that Act (persons having qualifying non-trade expenditure),

• section 555 of ITEPA 2003 (deduction for liabilities related to former employment),

• section 446 of ITTOIA 2005 (strips of government securities: relief for losses),

• section 454(4) of ITTOIA 2005 (listed securities held since 26 March 2003: relief for losses: persons other than trustees), and

• section 600 of ITTOIA 2005 (relief for patent expenses).

(2) In any other case, the provisions referred to at Step 2 of the calculation in section 23 are—

(a) the provisions listed in subsection (1)(b), and

(b) [F76 regulation 18 of the Unauthorised Unit Trusts (Tax) Regulations 2013].

Textual Amendments

F74 Words in s. 24(1)(b) omitted (with effect in accordance with s. 15(5) of the amending Act) by virtue of Finance Act 2013 (c. 29), s. 15(4)(b)

F75 S. 24(1)(b) entry omitted (21.7.2008 with effect in accordance with Sch. 27 para. 30(1) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 27 para. 27(2)

F76 Words in s. 24(2)(b) substituted (6.4.2014) by The Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819), regs. 1(3), 37(4) (with reg. 32)

[F77 24A Limit on Step 2 deductions U.K.

(1) If the taxpayer is an individual, there is a limit on certain deductions which may be made for the tax year at Step 2.

(2) The limit is determined as follows.

(3) Amount A must not exceed amount B.

(4) Amount A is—

(a) the deductions for the tax year at Step 2 for the reliefs listed in subsection (6) taken together, less

(b) so much of those deductions as fall within subsection (7).

(5) Amount B is—

(a) £50,000, or

(b) if more, 25% of the taxpayer's adjusted total income for the tax year (see subsection (8)).

(6) The reliefs are—

(a) relief under section 64 (trade loss relief against general income);

(b) relief under section 72 (early trade losses relief);

(c) relief under section 96 (post-cessation trade relief);

(d) relief under section 120 (property loss relief against general income);

(e) relief under section 125 (post-cessation property relief);

(f) relief under section 128 (employment loss relief against general income);

(g) relief under Chapter 6 of Part 4 (share loss relief);

(h) relief under Chapter 1 of Part 8 (interest payments);

(i) relief under section 555 of ITEPA 2003 (deduction for liabilities relating to former employment);

(j) relief under section 446 of ITTOIA 2005 (strips of government securities: relief for losses);

(k) relief under section 454(4) of ITTOIA 2005 (listed securities held since 26 March 2003: relief for losses: persons other than trustees).

(7) The deductions falling within this subsection are—

(a) deductions for amounts of relief so far as attributable to allowances under Part 3A of CAA 2001 (business premises renovation allowances);

(b) deductions for amounts of relief under a provision mentioned in subsection (6)(a) to (e) so far as made from profits of the trade or business to which the relief in question relates;

(c) deductions for amounts of relief under the provision mentioned in subsection (6)(a) or (b) so far as attributable to a deduction allowed under section 205 or 220 of ITTOIA 2005 (deduction for overlap profit in final tax year or on change of accounting date);

(d) deductions for amounts of relief under the provision mentioned in subsection (6)(g)—

(i) where the shares in question fall within section 131(2)(a) (qualifying shares to which EIS relief is attributable), or

(ii) where SEIS relief is attributable to the shares in question as determined in accordance with Part 5A (seed enterprise investment scheme)[F78 , or

(iii) where SI relief is attributable to the shares in question as determined in accordance with Part 5B (income tax relief for social investments).]

(8) The taxpayer's “adjusted total income” for the tax year is calculated as follows.

• Step 1 Take the amount of the taxpayer's total income for the tax year.

• Step 2 Add back the amounts of any deductions allowed under Part 12 of ITEPA 2003 (payroll giving) in calculating the taxpayer's income which is charged to tax for the tax year.

• Step 3 If the taxpayer is given relief in accordance with section 192 of FA 2004 (pension schemes: relief at source) in respect of any contribution paid in the tax year under a pension scheme, deduct the gross amount of the contribution. The “gross” amount of a contribution is the amount of the contribution before deduction of tax under section 192(1) of FA 2004.

• Step 4 If the taxpayer is entitled to a deduction for relief under section 193(4) or 194(1) of FA 2004 (pension schemes: excess relief under net payment arrangements or relief on making a claim) for the tax year, deduct the amount of the excess or contribution (as the case may be). The result is the taxpayer's adjusted total income for the tax year.]

Textual Amendments

F77 S. 24A inserted (with effect in accordance with Sch. 3 para. 3 of the amending Act) by Finance Act 2013 (c. 29), Sch. 3 para. 1 (with Sch. 3 paras. 4, 5)

F78 S. 24A(7)(d)(iii) and word inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 5

25 Reliefs and allowances deductible at Steps 2 and 3: supplementary U.K.

(1) This section supplements the provisions about reliefs and allowances in Steps 2 and 3 of the calculation in section 23.

(2) At Steps 2 and 3, deduct the reliefs and allowances in the way which will result in the greatest reduction in the taxpayer's liability to income tax.

(3) Subsection (2) is subject to—

• section 65(2) to (4) (priority rule in relation to trade loss relief against general income),

• section 80(2) (ring fence income),

• section 83(3) and (4) (carry-forward trade loss relief against trade profits),

• section 89(3) (terminal trade loss relief against trade profits),

• section 93(2) (terminal trade loss relief and mineral extraction trade),

• section 95(2) (foreign trades etc reliefs only against qualifying foreign income),

• section 115(2) (restrictions on reliefs for firms exploiting films),

• section 118(3) and (4) (carry-forward property loss relief against property business profits),

• section 121(2) and (3) (priority rule in relation to property loss relief against general income),

• section 129(2) to (4) (priority rule in relation to employment loss relief against general income),

• section 133(4) (share loss relief against general income),

• section 152(4) and (7) (loss relief against miscellaneous income),

• sections 574(3) to (8) and 575 (manufactured dividends on UK shares: restrictions on deductions),

• section 579(2) to (5) and 580 (manufactured interest on UK securities: restrictions on deductions),

• section 258 of CAA 2001 (special leasing of plant or machinery),

• F79 ...

• section 479 of that Act (persons having qualifying non-trade expenditure),

• section 601 of ITTOIA 2005 (how relief for patent expenses is given), and

• any other provision of the Income Tax Acts under which reliefs or allowances deductible at Step 2 or 3 are not permitted to be deducted from particular components of income or are required to be deducted from particular components of income or in a different order.

(4) A relief or allowance may be deducted at Step 2 or 3 only so far as there is sufficient income from which to deduct it.

(5) In deciding whether there is sufficient income from which to deduct a relief or allowance, reliefs and allowances already deducted at Step 2 or 3 must be taken into account.

(6) Nothing in Step 2 or 3 is to be read as permitting a relief or allowance to be deducted more than once.

Textual Amendments

F79 S. 25(3) entry omitted (21.7.2008 with effect in accordance with Sch. 27 para. 30(1) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 27 para. 27(3)

Modifications etc. (not altering text)

C12 S. 25(2) modified (21.7.2009) by Finance Act 2009 (c. 10), Sch. 6 para. 1(6)

26 Tax reductions U.K.

(1) If the taxpayer is an individual, the provisions referred to at Step 6 of the calculation in section 23 are—

(a) the following—

• Chapter 3 of Part 3 of this Act F80 ... (tax reductions for married couples and civil partners),

• [F81 Chapter 3A of Part 3 of this Act (transferable tax allowance for married couples and civil partners),]

• Chapter 1 of Part 5 (EIS relief),

• [F82 Chapter 1 of Part 5A (SEIS relief),]

• [F83 Chapter 1 of Part 5B (relief for social investments),]

• Chapter 2 of Part 6 (VCT relief),

• Chapter 1 of Part 7 (community investment tax relief),

• section 453 (qualifying maintenance payments),

• F84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• section 461 (spreading of patent royalty receipts),

• section 353(1A) of ICTA (relief for interest on loan to buy life annuity),

• section 535 of ITTOIA 2005 (top slicing relief), and

• section 539 of ITTOIA 2005 (relief for deficiencies), and

(b) the following—

• F85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• section 401 of ITTOIA 2005 (relief: qualifying distribution after linked non-qualifying distribution), F86 ...

• sections 677 and 678 of ITTOIA 2005 (relief where foreign estates have borne UK income tax).

• [F87 sections 2 and 6 of TIOPA 2010 (double taxation relief: relief by agreement), and

• section 18(1)(b) and (2) of TIOPA 2010 (relief for foreign tax where no double taxation arrangements).]

(2) In any other case, the provisions referred to at Step 6 of the calculation in section 23 are—

(a) the provisions listed in subsection (1)(b), and

(b) section 26 of FA 2005 (trusts with vulnerable beneficiary: income tax relief).

Textual Amendments

F80 Words in s. 26(1)(a) omitted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 1 para. 6(o)(ii)

F81 Words in s. 26(1)(a) inserted (with effect in accordance with s. 11(12) of the amending Act) by Finance Act 2014 (c. 26), s. 11(3)

F82 S. 26(1)(a) entry inserted (17.7.2012) (with effect in accordance with Sch. 6 para. 24(1) of the amending Act) by Finance Act 2012 (c. 14), Sch. 6 para. 8

F83 Words in s. 26(1)(a) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 6

F84 Words in s. 26(1)(a) omitted (17.7.2012) (with effect in accordance with Sch. 39 para. 32(6) of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 32(2)(a)

F85 Words in s. 26(1)(b) repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 73(2), Sch. 10 Pt. 1 (with Sch. 9 paras. 1-9, 22)

F86 Word in s. 26(1)(b) repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 73(3), Sch. 10 Pt. 1 (with Sch. 9 paras. 1-9, 22)

F87 Words in s. 26(1)(b) inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 73(4) (with Sch. 9 paras. 1-9, 22)

27 Order of deducting tax reductions: individuals U.K.

(1) This section makes provision about the order in which tax reductions are to be deducted at Step 6 of the calculation in section 23, if the taxpayer is an individual.

(2) Deduct the tax reductions in the order which will result in the greatest reduction in the taxpayer's liability to income tax for the tax year.

(3) Subsection (2) is subject to subsections (4) to (6).

(4) If the taxpayer is entitled to tax reductions for the tax year under more than one of the provisions listed in subsection (5), a tax reduction under a provision mentioned earlier in the list must be deducted before a tax reduction under a provision mentioned later in the list.

(5) The provisions are—

• Chapter 2 of Part 6 (VCT relief),

• Chapter 1 of Part 5 (EIS relief),

• [F88 Chapter 1 of Part 5A (SEIS relief),]

• [F89 Chapter 1 of Part 5B (relief for social investments),]

• Chapter 1 of Part 7 (community investment tax relief),

• section 353(1A) of ICTA (relief for interest on loan to buy life annuity),

• section 453 (qualifying maintenance payments),

• F90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• Chapter 3 of Part 3 of this Act F91 ... (tax reductions for married couples and civil partners).

(6) If the taxpayer is entitled to a tax reduction under—

(a) [F92 sections 2 and 6 of TIOPA 2010] (double taxation arrangements: relief by agreement), or

(b) [F93 section 18(1)(b) and (2) of TIOPA 2010] (relief for foreign tax where no double taxation arrangements),

that tax reduction must be deducted after any other tax reduction to which the taxpayer is entitled for the tax year.

Textual Amendments

F88 Words in s. 27(5) inserted (17.7.2012) (with effect in accordance with Sch. 6 para. 24(1) of the amending Act) by Finance Act 2012 (c. 14), Sch. 6 para. 9

F89 Words in s. 27(5) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 7

F90 Words in s. 27(5) omitted (17.7.2012) (with effect in accordance with Sch. 39 para. 32(6) of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 32(2)(a)

F91 Words in s. 27(5) omitted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 1 para. 6(o)(ii)

F92 Words in s. 27(6)(a) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 74(a) (with Sch. 9 paras. 1-9, 22)

F93 Words in s. 27(6)(b) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 74(b) (with Sch. 9 paras. 1-9, 22)

28 Order of deducting tax reductions: other persons U.K.

(1) This section makes provision about the order in which tax reductions are to be deducted at Step 6 of the calculation in section 23, if the taxpayer is a person other than an individual.

(2) Deduct the tax reductions in the order which will result in the greatest reduction in the taxpayer's liability to income tax for the tax year.

(3) Subsection (2) is subject to subsections (4) and (5).

(4) If the taxpayer is entitled to a tax reduction under—

(a) [F94 sections 2 and 6 of TIOPA 2010] (double taxation arrangements: relief by agreement), or

(b) [F95 section 18(1)(b) and (2) of TIOPA 2010] (relief for foreign tax where no double taxation arrangements),

that tax reduction must be deducted after any other tax reduction to which the taxpayer is entitled for the tax year, subject to subsection (5).

(5) If the taxpayer is a trustee and is entitled to a tax reduction under section 26 of FA 2005 (trusts with vulnerable beneficiary: income tax relief) that tax reduction must be deducted after any other tax reduction to which the taxpayer is entitled for the tax year.

Textual Amendments

F94 Words in s. 28(4)(a) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 75(a) (with Sch. 9 paras. 1-9, 22)

F95 Words in s. 28(4)(b) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 75(b) (with Sch. 9 paras. 1-9, 22)

29 Tax reductions: supplementary U.K.

(1) This section supplements the provisions about tax reductions in Step 6 of the calculation in section 23.

(2) A tax reduction may be deducted at Step 6 only so far as there is sufficient tax calculated at Step 5 of the calculation from which to deduct it.

(3) In deciding whether there is sufficient tax calculated at Step 5 from which to deduct a tax reduction, tax reductions already deducted at Step 6 must be taken into account.

(4) Subsections (2) and (3) apply in addition to—

(a) [F96 sections 36(1) to (5) and (7) and 41 of TIOPA 2010] (limits on credit for foreign tax), and

(b) any other provision of the Income Tax Acts that limits the amount of a tax reduction.

[F97 (4A) If the taxpayer is an individual, the total of the tax reductions within subsection (4B) that are deducted at Step 6 must not be greater than—

A − B

where—

• A is the amount of tax calculated at Step 5, and

• B is the total amount of the tax treated under section 414 (gift aid) as deducted from gifts made by the taxpayer in the tax year.

(4B) A tax reduction is within this subsection if it is under—

• Chapter 1 of Part 5 (EIS relief),

• [F98 Chapter 1 of Part 5A (SEIS relief),]

• [F99 Chapter 1 of Part 5B (relief for social investments),]

• Chapter 2 of Part 6 (VCT relief), or

• Chapter 1 of Part 7 (community investment tax relief).

(4C) Subsection (4A) applies in addition to subsections (2) and (3).]

(5) For the purposes of this Chapter, a person is treated as being entitled to a tax reduction under [F100 sections 2 and 6 of TIOPA 2010] if the person is entitled to credit against income tax under double taxation arrangements.

Textual Amendments

F96 Words in s. 29(4)(a) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 76(2) (with Sch. 9 paras. 1-9, 22)

F97 S. 29(4A)-(4C) inserted (retrospective with effect in accordance with art. 1(2) of the amending S.I.) by The Income Tax Act 2007 (Amendment) (No. 2) Order 2009 (S.I. 2009/2859), art. 4(2)(b)

F98 Words in s. 29(4B) inserted (with effect in accordance with s. 56(5) of the amending Act) by Finance Act 2013 (c. 29), s. 56(2)

F99 Words in s. 29(4B) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 8

F100 Words in s. 29(5) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 76(3) (with Sch. 9 paras. 1-9, 22)

30 Additional tax U.K.

(1) If the taxpayer is an individual, the provisions referred to at Step 7 of the calculation in section 23 are—

• section 424 (gift aid: charge to tax),

• [F101 section 809ZN (tainted gift aid donations: charge to tax),]

• [F101 section 809ZO (tainted charity donations by trustees: charge to tax),]

• [F102 Chapter 8 of Part 10 of ITEPA 2003 (high income child benefit charge),]

• section 205 of FA 2004 (pension schemes: the short service refund lump sum charge),

• [F103 section 205A of FA 2004 (pension schemes: the serious ill-health lump sum charge),]

• section 206 of FA 2004 (pension schemes: the special lump sum death benefits charge),

• section 208(2)(a) of FA 2004 (pension schemes: the unauthorised payments charge),

• section 209(3)(a) of FA 2004 (pension schemes: the unauthorised payments surcharge),

• section 214 of FA 2004 (pension schemes: the lifetime allowance charge),

• section 227 of FA 2004 (pension schemes: the annual allowance charge), and

• section 7 of F(No.2)A 2005 (social security pension lump sum).

[F104 (2) If the taxpayer is a trustee, the provisions referred to at Step 7 of the calculation in section 23 are—

• section 496 (discretionary payments by trustees: tax pool adjustment),

• section 809ZN (tainted gift aid donations: charge to tax), and

• section 809ZO (tainted charity donations by trustees: charge to tax).]

Textual Amendments

F101 Words in s. 30(1) inserted (19.7.2011) (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 8(a)

F102 Words in s. 30(1) inserted (17.7.2012) (with effect in accordance with Sch. 1 para. 7 of the amending Act) by Finance Act 2012 (c. 14), Sch. 1 para. 6(3)

F103 S. 30(1) entry inserted (19.7.2011) (with effect in accordance with Sch. 16 para. 85 102 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 83

F104 S. 30(2) substituted (19.7.2011) (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 8(b)

31 Total income: supplementary U.K.

(1) This section applies for the purposes of calculating total income.

(2) Income from which a deduction in respect of income tax is to be made (or treated as made) at the basic [F105 rate] F106 ... in force for a tax year is treated as income of that tax year.

(3) If—

(a) a dividend is paid, or another distribution is made, in a tax year,

(b) a person is entitled to a tax credit in respect of the dividend or other distribution, and

(c) the amount or value of the dividend or other distribution is treated under section 398 of ITTOIA 2005 as increased by the amount of the tax credit,

the amount or value as increased is treated as income of that tax year.

(4) Subsections (2) and (3) apply even if all or part of the income, or the dividend or other distribution, accrued or will accrue in a different tax year.

(5) An assessment that has become final and conclusive for income tax purposes for a tax year is also final and conclusive for the purposes of calculating total income.

Textual Amendments

F105 Word in s. 31(2) inserted (with effect in accordance with s. 11(12) of the amending Act) by Finance Act 2014 (c. 26), s. 11(4)

F106 Words in s. 31(2) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 12

32 Liability not dealt with in the calculation U.K.

The liabilities referred to in section 22(2) are income tax liability—

• [F107 under section 74C(5) (non-active traders: withdrawal of relief),]

• under section 79(1) (capital allowances restrictions: withdrawal of relief),

• under section 81(6) (dealings in commodity futures: withdrawal of relief),

• under [F108 section 103B(5)] (non-active partners: withdrawal of relief),

• under section 235 (withdrawal or reduction of EIS relief),

• [F109 under section 257G (withdrawal or reduction of SEIS relief),]

• [F110 under section 257S (withdrawal or reduction of relief for social investments),]

• under sections 266 to 270 (withdrawal or reduction of VCT relief),

• under section 372 (withdrawal or reduction of CITR),

• under section 512 (heritage maintenance settlements: application of property for non-heritage purposes),

• under Chapter 1 of Part 13 (transactions in securities),

• under regulations made under section 918(4) (foreign payers of manufactured dividends: Real Estate Investment Trusts: the reverse charge),

• under section 920 or 923 (foreign payers of manufactured interest or manufactured overseas dividends: the reverse charge),

• under Chapter 15, 16 or 17 of Part 15 (deduction of tax at source: collection mechanisms),

• F111 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• under paragraph 11(3) of Schedule 20 to FA 1994 (recovery of excess credit for overseas tax: changes for facilitating self-assessment),

• of the person who is (or persons who are) the responsible person in relation to an employer-financed retirement benefits scheme under section 394(2) of ITEPA 2003,

• under Chapter 5 of Part 4 of FA 2004 (registered pension schemes: tax charges), except any liability under a provision mentioned in section 30(1), F112 ...

• under section 682(4) of ITTOIA 2005 (assessments, adjustments and claims after the administration period), so far as the liability represents a tax reduction given effect at Step 6 of the calculation in section 23[F113 , and

• under section 24(4) of TIOPA 2010 (recovery of excess credit for overseas tax).]

Textual Amendments

F107 Words in s. 32 inserted (21.7.2008 with effect in accordance with Sch. 21 paras. 6, 7 of the amending Act) by Finance Act 2008 (c. 9), Sch. 21 para. 3

F108 Words in s. 32 substituted (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 4 paras. 5, 21

F109 Words in s. 32 inserted (with effect in accordance with s. 56(5) of the amending Act) by Finance Act 2013 (c. 29), s. 56(3)

F110 Words in s. 32 inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 9

F111 Words in s. 32 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 77(2), Sch. 10 Pt. 1 (with Sch. 9 paras. 1-9, 22)

F112 Word in s. 32 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 77(3), Sch. 10 Pt. 1 (with Sch. 9 paras. 1-9, 22)

F113 Words in s. 32 inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 77(4) (with Sch. 9 paras. 1-9, 22)